Market eyes G-20, mulls demand outlook after WGC report

SAN FRANCISCO (MarketWatch) — Gold futures settled at their lowest level in nearly six months Thursday with a stronger dollar, uncertainty ahead of the Group of 20 nations meeting, and subdued demand amid holidays in China weighing on prices.

Investors also assessed the outlook for gold considering disappointing economic data from the euro zone, a fall in U.S. jobless claims and a report on last year’s gold demand trends.

Gold for delivery in April
US:GCJ3
fell $9.60, or 0.6%, to settle at $1,635.50 an ounce on the Comex division of the New York Mercantile Exchange. That was the lowest settlement for a most-active futures contract since Aug. 20, according to FactSet data.

Through it all, many love the euro

(4:45)

The euro remains popular across much of Europe even though it has left many of the region's economies struggling to compete.

Prices have lost 2.5% year to date. They traded between $1,632.80 and $1,650 Thursday.

March silver
US:SIH3
dropped 52 cents, or 1.7%, to end at $30.35 an ounce, its lowest close since Jan. 9.

Losses in gold and silver intensified after a report from Bloomberg, citing a draft statement, said finance ministers and central banks from the Group of 20 nations will repeat a vow to refrain from competitive devaluation and to monitor possible “monetary-policy spillover.” The G-20 meets on Friday and Saturday in Moscow. Read G-20 to vow no competitive devaluation: report.

If the G-20 draft statement publicly declares that there is no concerted currency war, that would take attention away from gold as a haven, said Jeffrey Wright, managing director at Global Hunter Securities.

A currency war refers to a competitive currency devaluation by countries trying to ease strength in their currencies to boost exports.

For now, “gold is likely to benefit from tensions stemming from the ongoing currency war, we believe,” said James Steel, a bullion analyst at HSBC.

HSBC believes that the number of participants engaging in foreign-exchange “activism is rising,” which in turn points to policies from countries including Japan and Switzerland to try to ease the strengthening of their respective currencies. A stronger currency tends to hurt a country’s exports, making them more expensive.

Weak demand has also persisted for gold despite a bullish outlook from analysts, including at HSBC.

“Gold may be supported by concerns over the coming automatic spending cuts set to begin” on March 1 in the U.S., said Steel.

“Central banks’ move from net sellers of gold to net buyers that we have seen in recent years has continued apace,” with official-sector purchases from around the globe now at their highest level in nearly half a century, said Marcus Grubb, managing director for investment at the World Gold Council.

Analysts at Commerzbank said one big surprise at the country level was India, where fourth-quarter gold demand soared over 41%, with even China unable to overtake Indian demand. “For this year, the WGC anticipates higher gold demand in both countries,” they said.

Elsewhere in the metals complex, March futures for copper
US:HGH3
fell half a cent, or 0.1%, to $3.74 a pound and March palladium
US:PAH3
fell $8, or 1%, to $764.05 an ounce.

April platinum futures
US:PLJ3
fell $18.80, or 1.1%, to $1,710.90 an ounce after climbing 0.7% Wednesday.

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